Recent years have witnessed a significant increase in the use of coronary revascularization (CABG or PCI). The total number of CABG and PCI procedures performed in the US has increased approximately 2 fold between 1990 and 2001 to more than a 1.6 million per year (American Heart Association, 2004 update) with $33 billion in associated health care expenditures (HCUP, 2004). 1 less studied aspect of delivering these procedures is cost and its relationship to outcomes of cardiac care. The health care system is again under scrutiny for the significant increases in health care expenditures and quality has become at the forefront of policy makers' and the public's agenda. As such, it becomes important to explore the determinants of cost and whether an association exists between costs and outcomes of care, especially with the increased interest in pay-for-performance approaches. This study aims to address this issue through examining 2 'popular' procedures, CABG and PCI. More specifically, the study has the following aims: (1) Examine the association between risk-adjusted hospital-level costs and outcomes of coronary revascularization procedures. (2) Investigate the effect of patient, hospital and market characteristics on hospital-level costs of coronary revascularization procedures. The significance of this study is in its attempt to explore whether a pay-for-performance opportunity exists for coronary revascularization procedures. Through measuring the association between costs and outcomes, 1 of 2 scenarios may be revealed through the study results: 1) no association between costs and outcomes or 2) an association between costs and outcomes. If the first scenario was proven to be true, that may have a significant impact on the health care reimbursement mechanisms. Public and private payers may choose to selectively contract with low-cost hospitals without fear of adverse outcomes. On the other hand, the second scenario may allow private and public payers to employ a pay-for-performance scheme through which high-quality hospitals are reimbursed at higher rates to subsidize the additional costs or provide incentives to maintain high quality. Another way to examine the findings is through grouping hospitals in 1 of 4 categories: 1) low-cost low-quality, 2) low-cost high quality, 3) high-cost high-quality and 4) high-cost low-quality. Hospitals that will be in the second and third category may be eligible for additional incentives (reimbursement) under a pay-for-performance scheme. [unreadable] [unreadable]